Last week, Justin Trudeau said that his government will not meet its promise to balance the books before the next election. The Conservatives will hammer him for breaking a key election promise. But, Tom Walkom writes, Trudeau is doing the right thing:
Not that there is anything wrong, in principle, with balancing budgets. Everything else being equal, budget balancing is a good idea. It forces government to exercise some discipline over spending. It signals to voters that if they want extra services they should be prepared to pay higher taxes.
these days, everything else is not equal. The world economy is weak. Japan is struggling, as are parts of Europe. The Chinese economy is slowing.So-called miracle economies like that of Brazil are no longer quite so miraculous. Nor has the much anticipated U.S. recovery lived up to expectations.The decision by central banks to slash interest rates to near (or in some cases below) zero boosted the stock market for a while. But it has not helped the real economy much. Companies are happy to use cheap money to buy one another. In a time of uncertainty, they are less keen on expanding job-creating productive capacity.
For countries such as Canada that rely on natural resources, falling commodity prices have added an extra burden.
The world has changed since Trudeau set his 2019 deadline. There are only three ways to balance the books: cut spending, raise taxes or sell crown assets. And, at this point, there is little left to sell.
Trudeau's plan to spend $60 billion on infrastructure will help. That number may have to be bigger. The Conservatives will howl and call Trudeau names. But they've done that for ten years.
Still, doing the right thing can be really difficult.